Dow Chemical to Take Full Control of Dow Corning Venture

  • Dow gets all of 72-year-old venture, sets merger with DuPont
  • Corning gets $4.8 billion, has new entity for semiconductors

Dow Chemical Co., which plans to merge with DuPont Co., announced another deal Friday: an agreement to take full control of Dow Corning, a 72-year-old joint venture with Corning Inc. that makes silicones used in tires.

For its 50 percent stake in the Dow Corning partnership, Corning said Friday in a statement that it will get $4.8 billion in cash from the venture and form a new entity to hold 40 percent of Hemlock Semiconductor Group, which produces polycrystalline silicon used in the manufacturing of semiconductor and solar devices. Corning’s stock jumped the most in two years as broad equity indexes tumbled.

Dow Chemical said in a separate statement that the Dow Corning deal will add to earnings per share and cash flows and yield more than $1 billion in annual earnings before interest, taxes, depreciation and amortization. The transaction, expected to be completed in the first half of 2016, will increase the company’s product offerings in industries such as construction, consumer care and automobiles. Dow and Dow Corning are based in Midland, Michigan.

Corning Stake

Corning said that after the venture restructuring, Hemlock will be 40.25 percent owned by Corning through the newly formed entity, 40.25 percent owned by Dow Corning and 19.5 percent owned by Shin-Etsu Handotai Co. Ltd. Currently, Dow Corning owns 80.5 percent of Hemlock, which has 1,000 employees.

“While we will no longer receive equity earnings or dividends from Dow Corning’s silicones business, we are confident that Hemlock and deployment of the new entity’s $4.8 billion will create significant value for our shareholders, including EPS accretion,” R. Tony Tripeny, Corning chief financial officer, said in the statement.

Corning said that in 2015, Hemlock is expected to generate about $1 billion in sales and $160 million in earnings and contribute about $65 million in gross equity earnings to Corning.

The stock of the Corning, New York-based company rose 5.6 percent to $18.68, the biggest gain since Oct. 23, 2013. Dow Chemical fell 2.8 percent to $53.37 in New York.

Dow’s merger with DuPont will create a $130 billion company that will then be divided into three new businesses focused on agriculture, commodity chemicals and specialty products. The agreement, under consideration since at least February, comes after two years of pressure from activist investors who argued that shareholders of both companies would realize greater value if they were broken up.

Dow Chemical Chief Executive Officer Andrew Liveris said in the statement on Dow Corning that “the addition of a silicones position will expand our product offerings across multiple businesses while driving innovative solutions that will enable us to go deeper into key end markets by leveraging Dow’s existing, strong science and engineering competencies across new chemistries.”

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